March will be test of auto demand in US

FILE - In this Tuesday, Jan. 7, 2014, file photo, a salesmen at a car dealer digs out cars covered in snow at a dealership in Indianapolis, as temperatures hovered around zero. The subzero cold followed inches of snow and high winds that made traveling treacherous. (AP Photo/Michael Conroy, File)

DETROIT (AP) — March is the month to watch for the U.S. auto industry.

Sales have been slower than expected so far this year. As the spring thaw begins, automakers will see if the slowdown was due to historic cold temperatures and snowfall — as many believe — or if there are deeper reasons for sagging demand.

“March will give us a sense of how real the recovery is going to be this year,” said Alec Gutierrez, a senior analyst for Kelley Blue Book.

Automakers entered 2014 expecting to sell more than 16 million cars and trucks for the first time since the recession. But so far, sales are on pace to hit around 15 million, which would be 600,000 less than last year. But Gutierrez believes sales will recover reach 16.3 million for the year. The industry sold 16.1 million vehicles in 2007.

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“We think there is still plenty of time left this year for sales to rebound and kind of get us back on that pace,” he said.

On Monday, General Motors, Ford and Toyota all reported U.S. sales declines for February. The country’s top three automakers by sales said the month started slowly but sales began to recover in the second half. If that momentum continues into March, fears of a broader sales slowdown may prove to be unfounded.

Industry analysts expect overall sales to rise about 1 percent for the month, a slow pace compared with the 8 percent increase for all of last year.

Chrysler and Nissan were able to notch double-digit gains, but discounted some key models to get there. That points to another potential problem if automakers have to offer steeper discounts to shrink their inventories.

For consumers, it means deals. Incentives are the highest they’ve been in three years, averaging $2,633 per vehicle in February, up more than 5 percent from a year ago, according to TrueCar.com, a car buying site.

Larry Dominique, executive vice president of TrueCar, said automaker spending on discounts is growing faster than average sales prices, but he predicted that the bargains will wane as the weather gets warmer and customers go shopping again.

“We expect a return to balance once the winter subsides and inventories ease,” he said.